Why Sales Tax is Not Included in the Price of Goods in the US
The primary reason that sales tax is not included in the price of goods is that the U.S. does not have one common federal law regulating sales tax. In the early 20th century, only a few states had implemented sales taxes, and they were generally low. As a result, it made more sense for businesses to advertise prices without including the sales tax, as it would vary from state to state. Over time, this practice became deeply ingrained in American consumer culture. Sellers believe that consumers are emotionally affected by the listed prices, even when the consumer knows logically what the ultimate cost will be.
Sales Tax System in the US
Unlike the value added tax, a sales tax is imposed only at the retail level. Sales taxes are imposed only on taxable transfers of goods or services. The tax is computed as the tax rate times the taxable transaction value. Sales tax rates vary widely across the US, ranging from zero in some states to over 10% in others.
Sales Tax Variation Across States
Almost every state in the country has a sales tax. State sales tax rates range from a high of 7.25% in California to 2.9% in Colorado. The only five with no state sales tax are Alaska, Oregon, Montana, Delaware, and New Hampshire. Some states have an average local tax higher than their state tax. The combined sales taxes for state and average local range from 0% to 9.55%.
Do Americans Pay Tax on Items?
Consumers often have no idea where their hard-earned money is going and how it’s being utilized when taxes are already a part of the price.